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On June 26, the U.S. District Court for the Eastern District of Virginia approved a preliminary settlement to resolve putative class allegations against an online payday lending company and related entities (defendants) accused of issuing high interest loans through a “rent-a-tribe” lending operation. According to the class’s second amended complaint, the defendants’ “rent-a-tribe” operation was an “attempt to circumvent state and federal law by issuing high interest loans in the name of a Native American tribal business entity that purports to be shielded by the principle of tribal sovereign immunity.” The class—which consists of borrowers from throughout the U.S.—alleged that the defendants provided “financing and various lending functions” carrying “extortionately high interest rates for short-term loans” that were “far beyond legal limits,” and that the unlawful interest rates were not disclosed to borrowers during the application process. Additionally, the class alleged that the defendants failed to provide key loan terms or misrepresented the loan terms, including repayment schedules, finance charges, and the total amount of payments due. Under the terms of the settlement, the defendants will pay a $65 million cash payment, cancel $76 million in high-interest loans, and provide other non-monetary relief.
On March 6, the U.S. Court of Appeals for the 4th Circuit held that Congress did not waive sovereign immunity for lawsuits under the FCRA, affirming the lower court’s dismissal of a consumer action. According to the opinion, a consumer filed a lawsuit against the U.S. Department of Education (the Department), a student loan company, and the three major credit reporting agencies, alleging numerous claims, including violations of the FCRA for failing to properly investigate disputes that federal student loans were fraudulently opened in his name. The Department filed a motion to dismiss to the FCRA claims against it arguing the court lacked subject matter jurisdiction based upon a claim of sovereign immunity. The lower court agreed, holding Congress had not affirmatively waived sovereign immunity for suits under the FCRA.
On appeal, the 4th Circuit agreed with the lower court. The appellate court noted that, although the FCRA includes a “government or governmental subdivision or agency” as part of the definition of “person” in the statute, there is a “longstanding interpretive presumption that ‘person’ does not include the sovereign,” and that waivers of sovereign immunity need to be “unambiguous and unequivocal.” The appellate court noted that Congress waived immunity in other sections of the FCRA, which were not at issue in this case and, had Congress waived immunity for enforcement purposes under the FCRA, it would raise a new host of “befuddling” and “bizarre” issues, such as the prospect of the government bringing criminal charges against itself. Therefore, the appellate court concluded that the federal government may be a “person” under the substantive provisions, but that without a clear waiver from Congress, the federal government is still immune from lawsuits under the FCRA’s enforcement provisions.
On March 22, the U.S. District Court for the Western District of Louisiana denied the Defense Finance and Accounting Service’s (DFAS), a federal government agency within the Department of Defense, motion to dismiss a private action under the Fair Credit Reporting Act (FCRA) based on a lack of subject matter jurisdiction as a result of sovereign immunity. The court found that FCRA’s definition of person includes “government or governmental subdivision or agency,” and therefore, waives the United States’ sovereign immunity under FCRA. The court did not agree with DFAS’ position that the terms “government or governmental subdivision or agency” are too broad to constitute a wavier of sovereign immunity. In support of its position, the court cited a decision by the U.S. Court of Appeals for the 7th Circuit providing that the FCRA “unequivocally waives the United States’ sovereign immunity from damages for violations under the FCRA.”
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference